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Smart Money: 15 Takeover Rumors Seeing Institutional Buying

How can you tell which companies are wearing bulls-eyes on their backs?

When investors are looking for larger-than-average returns, they often try to sniff out the companies that seem ripe for a takeover. For while acquisitions targets aren't always easy to locate, they can generate big profits if you're savvy enough to spot them.

Here's why: In order for one company to buy out another, all shareholders must be on board with the merger. So when acquirers put a bid on the company to-be-acquired, they offer a premium for its stock, essentially sweetening the deal in order to incentivize approval.

So how can you tell which companies are wearing bulls-eyes on their backs? It's impossible to say for certain, but we came up with a way to try and find out.

First, we got the word on the Street, reading Barron's, Wall Street Journal, Morningstar, Marketwatch, TheStreet.com, StreetInsider, and other publications to see which takeover targets they were promoting.

This created a universe of about 250 companies, which you can access here. Then, we wanted to know which rumors were being taken seriously -- so we tried to find the takeover rumors that are seeing institutional buying (i.e., hedge funds, pension funds, big money managers etc.).

Institutional investors manage billions of dollars worth of holdings, so you can be pretty certain that before they buy, they're going to do some pretty thorough research.

After crunching the numbers, we came up with the following list. These rumored takeover targets have seen significant institutional inflows over the last three months, suggesting that the smart money thinks there may be some truth to the gossip -- do you?

Institutional data sourced from Reuters. The list has been sorted by the change in institutional ownership over the last three months.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top 9 stocks mentioned above. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.

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Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.